Briefly:

Intraday trade: The S&P 500 index gained 0.3% on Tuesday, after opening 0.2% higher. The broad stock market will likely open virtually flat today. We may see some profit-taking action following the recent rally. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): short positions in the S&P 500 Index with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Our intraday outlook is neutral. Our short-term outlook is bearish, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes gained between 0.3% and 0.5% on Tuesday, as investors' sentiment remained bullish. The S&P 500 index continued higher despite some short-term technical overbought conditions. It currently trades just 0.5% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.5% and the technology Nasdaq Composite gained 0.3% yesterday.

The nearest important level of support of the S&P 500 index is now at around 2,850, marked by the recent level of resistance. The next level of support is at 2,825-2,835, marked by the recent local lows. The support level is also at around 2,800. On the other hand, the nearest important level of resistance is at 2,870-2,875, marked by the mentioned January's all-time high. Potential level of resistance is also at 2,900.

The broad stock market got even closer to its January's record high, as investors' sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index broke above the level of 2,850 yesterday following last Thursday's bounce off 2,800 mark. But will it continue higher? There are still two possible medium-term scenarios - bearish that will lead us towards the February low again, and the bullish one - breakout higher towards 3,000 mark. The latter one is getting more and more real. The S&P 500 index still seems to be "climbing a wall of worries" here:

More Uncertainty Following Recent Advance

Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between 0.0% and +0.05% vs. their yesterday's closing prices. The main European stock market indexes have been mixed so far. Investors will wait for the Crude Oil Inventories number release at 10:30 a.m. The broad stock market will likely fluctuate following the recent rally today. We may see some short-term profit-taking action, as stocks trade slightly below the medium-term resistance level.

The S&P 500 futures contract trades within an intraday consolidation following breakout above the level of 2,850. The nearest important level of resistance is at around 2,860-2,865, marked by the local highs. On the other hand, support level is at 2,855, marked by some short-term local lows. The support level is also at 2,845-2,850. The futures contract trades within a flat correction following the recent rally, as we can see on the 15-minute chart:

Nasdaq Still Below 7,500 Mark

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The big cap tech stocks gauge is relatively weaker than the broad stock market, as it remains below its late July record high of around 7,530. The nearest important level of resistance is at 7,480-7,500. On the other hand, support level is at 7,400-7,450. The Nasdaq futures contract trades slightly below the level of 7,500, as the 15-minute chart shows:

Big Cap Tech Stocks - Mixed Picture Again

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock reached yet another new record high yesterday at the level of $209.50, but we saw some profit-taking action later in the day. Will it continue higher despite some clear short-term technical overbought conditions? There have been no confirmed negative signals so far. The nearest important level of support is now at $190-200, marked by the previous resistance level:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It continued to retrace its recent downward correction yesterday, as it broke above the price of $1,850. The nearest important level of resistance is now at around $1,880, marked by the record high. On the other hand, support level is at $1,820-1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Dow Jones Continues Higher

The Dow Jones Industrial Average extended its short-term uptrend yesterday, as it broke above the recent local high of around 25,600. The nearest important level of resistance is now at around 25,800, marked by the late February local high. The blue-chip stocks' gauge is still relatively weaker than the broad stock market, as it trades well below the late January's record high of 26,616.71. There have been no confirmed negative signals so far:

The S&P 500 index extended its short-term uptrend yesterday. The broad stock market got closer to its late January's record high. Will the uptrend continue? There have been no confirmed negative signals so far, but we can see some short-term technical overbought conditions.

Concluding, the broad stock market will likely open virtually flat today. We may see a profit-taking action at some point. But if the index breaks above its record high, we could see more buying pressure.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

Trading position (short-term; our opinion): short positions in the S&P 500 Index with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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